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In this market sellers usually pay all closing costs. My question is where they can pull them from - if the buyers offer a price that is the amount of mortgage + what they'll owe the agents + enough left over for closing costs, can the money for closing costs be transferred to the buyer at close of escrow?
The closing costs can be negotiated either way. I'm not sure how the escrow portion works. As a seller, when you receive the offer there will be a portion that speaks to % the seller will pay in closing costs. A good deal for the seller is when that percentage is 0.
In this market sellers usually pay all closing costs. My question is where they can pull them from - if the buyers offer a price that is the amount of mortgage + what they'll owe the agents + enough left over for closing costs, can the money for closing costs be transferred to the buyer at close of escrow?
First I will point out that market conditions are local, and that here in my part of NJ sellers are NOT, as a rule, paying closing costs.
That being said, if the seller is paying closing costs, it would be usual for those costs to be paid at the closing. Whomever is distributing all the money brought by the buyer (whether his own cash or from the morgtgage loan) should handle the payoffs. That would include the sellers mortgage, the sellers real estate broker, the sellers attorney, and any closing costs the seller has agreed to pay on behalf of the buyer. Whatever is left goes to the seller. The only time money would be paid to the buyer at closing is for repairs that both parties agreed would be taken care of by the buyer after closing at the sellers expense. And most of the time, that money would go into an escrow account so that it couldn't be used for anything but the agreed upon repair.
That's how it works in NJ anyway.
Last edited by Bill Keegan; 01-29-2010 at 12:21 PM..
Reason: typos
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Quote:
Originally Posted by Fields of Green
In this market sellers usually pay all closing costs. My question is where they can pull them from - if the buyers offer a price that is the amount of mortgage + what they'll owe the agents + enough left over for closing costs, can the money for closing costs be transferred to the buyer at close of escrow?
Sellers don't pay all closing costs in my market.
It would be highly unusual (but not impossible) for the buyer to receive cash proceeds at closing, in spite of what the "Make a million dollars in real estate" internet sites say.
In this market sellers usually pay all closing costs. My question is where they can pull them from - if the buyers offer a price that is the amount of mortgage + what they'll owe the agents + enough left over for closing costs, can the money for closing costs be transferred to the buyer at close of escrow?
It sounds like you are assuming that the seller is paying closing costs out of another pot of money other than the sales proceeds, and you want the "extra" money at COE. Not how it usually works. If there are enough sales proceeds left over for closing costs, then that's all there is, the seller will not pay extra. Don't expect the buyer to get cash if loan financing is involved.
Around here, it's not unusual for sellers to contribute closing costs, but has to be negotiated for each sale.
It sounds like you are assuming that the seller is paying closing costs out of another pot of money other than the sales proceeds, and you want the "extra" money at COE. Not how it usually works. If there are enough sales proceeds left over for closing costs, then that's all there is, the seller will not pay extra. Don't expect the buyer to get cash if loan financing is involved.
Around here, it's not unusual for sellers to contribute closing costs, but has to be negotiated for each sale.
Actually, I'm assuming neither the buyer nor seller has any pot of money, but if sellers agree to pay all closing costs (which is the norm here currently so sellers have any hope of selling their homes), then with all the money the buyer brings to the close, can the seller use some to pay off their mortgage, some to pay the agents, some to pay the fees and all closing costs, and then of course keep whatever may be left? I didn't suggest buyer receives any cash, just wondering if that's how it works when the seller pays all closing costs - they use part of the money buyer provides at closing. Of course really its the buyer paying the closing costs, but the price offered is adjusted to reflect this (say the closing costs are 10k - so the two sides might negotiate something like the offer on the house is either 300k plus all closing costs paid by seller, or the price is 290, buyer pays all closing costs).
Actually, I'm assuming neither the buyer nor seller has any pot of money, but if sellers agree to pay all closing costs (which is the norm here currently so sellers have any hope of selling their homes), then with all the money the buyer brings to the close, can the seller use some to pay off their mortgage, some to pay the agents, some to pay the fees and all closing costs, and then of course keep whatever may be left? I didn't suggest buyer receives any cash, just wondering if that's how it works when the seller pays all closing costs - they use part of the money buyer provides at closing. Of course really its the buyer paying the closing costs, but the price offered is adjusted to reflect this (say the closing costs are 10k - so the two sides might negotiate something like the offer on the house is either 300k plus all closing costs paid by seller, or the price is 290, buyer pays all closing costs).
Thanks for clarifying. You are essentially correct in how it works. The seller uses the proceeds of the sale (which is now their money, not the buyers) to pay all the various costs, including closing costs if that is part of the agreement. Of course, this assumes that there is enough to cover all the costs without bringing more out of pocket.
Keep in mind that the home still needs to appraise for full purchase price with any closing costs included. So that house must appraise for $300K for your example to work.
In CA, I am told that realtors can loan the buyer money to pay the closing costs. Since they typically take 6%, they have the cash to move the sale along.
It would be highly unusual (but not impossible) for the buyer to receive cash proceeds at closing, in spite of what the "Make a million dollars in real estate" internet sites say.
Thanks for the laugh. Not in this market either.
Here's a concept (sorry, I tried to make it into a haiku but failed):
1) I sell you my house - you give me money. Life is good.
2) You give me money - I sell you my house. Life is good.
3) You expect me to sell you my house AND give you money - I kick you in the ass on your way out. Works for me.
We recently sold our house in FL and buyer paid his own closing costs. Seriously, if he showed up at the closing short, there'd have been no closing.
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